Surrounded by a field of blooming canola, an oilfield pumpjack, belonging to Penn West, at work near Brooks, Alta.Larry MacDougal
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
Interfor Corp.'s deal to acquire four U.S. sawmills is well-priced and should prove accretive to earnings, Raymond James analyst Daryl Swetlishoff said.
On Thursday, the company announced an agreement to purchase the mills in the U.S. Southeast and Pacific Northwest from Simpson Lumber Co. for $94.7-million (U.S.) plus future payments.
"With an outstanding track record of strategic capital deployment we consider Interfor to be a core stock holding," Mr. Swetlishoff said. "While we forecast tighter lumber markets we see material upside from capital already deployed even under a constant lumber price scenario.
He upgraded the stock to "strong buy" from "outperform" and raised his price target to $23.50 (Canadian) from $21.25.
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UBS analyst Brian MacArthur downgraded Kinross Gold Corp. to "neutral" from "buy," citing the stock's recent price appreciation and also its exposure to Russia.
"KGC, with assets in locations including Russia and Mauritania, has greater exposure to emerging-market risks than other senior gold producers in North America. We note that KGC's emerging-market assets currently account for about 50 per cent of our net asset value and estimated 2015 EBITDA estimates," Mr. MacArthur said.
He cut his price target to $3 (U.S.) from $3.25.
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UBS analyst Brian MacArthur upgraded Potash Corp. of Saskatchewan Inc. to "buy" from "neutral," encouraged by the fertilizer producer's improving free cash flow and the downside protection that the stock's dividend provides.
"POT is positioned to benefit from a significant ramp-up of low cost production through 2017 as its new Rocanville and Picadilly operations enter production. In the near term, the planned closure of Mosaic's Carlsbad operations in January 2015 and the current flood at Uralkali's Solikamsk-2 mine could remove up to 2.4-3.4 million tonnes of combined capacity from the market and provides the opportunity for POT to gain more volumes. Furthermore, this could also lead to higher pricing," he said in a statement.
"POT's dividend currently yields about 4 per cent and we believe it provides downside protection given that the dividend can be funded even if potash prices remain flat. In fact over time we believe management may be able to return excess cash to shareholders through an increased dividend or further share repurchases," he said.
Mr. MacArthur raised his price target by $2 (U.S.) to $40.
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Drastic measures will be required to fix Parallel Energy Trust's balance sheet, says TD Securities analyst Aaron Bilkoski.
Slumping oil prices, along with significantly reduced cash flow are exacerbating Parallel's pre-existing balance sheet problems, says Mr. Bilkoski.
"The recent downturn in commodity price [oil] has negatively affected our cash flow outlook and hindered the debt-reduction momentum we saw earlier in the year," he says. "Although Parallel had proactively cut the dividend mid- November, we believe that additional cuts cuts are probable."
He downgraded the company's shares to "reduce" from "hold" and slashed his target price to 75 cents (Canadian) from $3.25.
TD also made several updates, downgrades and price target changes to energy companies it covers after rolling out its 2016 estimates for the sector and significantly reducing its spending assumptions. Some energy stocks were upgraded, in part because TD believes that, overall, current valuations "are representing balance sheet distress that does not exist."
The actions included:
Downgrading Penn West Petroleum to "reduce" from "hold" with a price target of 70 cents (Canadian).
Downgrading Baytex Energy to "hold" from "buy" with a price target of $22 (Canadian).
Upgrading Gasfrac Energy Services to "hold" from "reduce" with a price target of 35 cents (Canadian).
Upgrading Horizon North Logistics to "buy" from "hold" with a price target of $3 (Canadian).
Upgrading Husky Energy to "action list buy" from "buy" with a price target of $32 (Canadian).
Downgrading Legacy Oil + Gas to "hold" from "buy" with a price target of $2 (Canadian).
Upgrading Pacific Rubiales Energy to "hold" from "reduce" with a price target of $7.50 (Canadian).
Downgrading Trilogy Energy to "hold" from "buy" with a price target of $9 (Canadian).
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In other analyst actions:
Raymond James downgraded Black Diamond Group to "market perform" from "outperform" and cut its price target to $18 (Canadian) from $20. (Read more on Black Diamond in our Small-Caps to Watch post today)
Desjardins Securities upgraded Capstone Infrastructure to "buy" citing "oversold conditions" but trimmed its price target to $4 (Canadian) from $4.50.
Desjardins downgraded Alimentation Couche-Tard to "hold" from "buy" but hiked its price target to $49 (Canadian) from $44.
Raymond James cut its price target on Barrick Gold to $14.50 (U.S.) from $17 and maintained a "market perform" rating.
Acumen Capital upgraded Twin Butte Energy to "buy" from "speculative buy" with a price target of $1.75 (Canadian).
Acumen Capital downgraded Anderson Energy to "sell" from "hold" with a price target of 15 cents (Canadian).
Acumen Capital downgraded Tuscany Energy to "hold" from "speculative buy" with a price target of 40 cents (Canadian).
Acumen Capital downgraded Yoho Resources to "speculative buy" from "buy" with a price target of $2.25 (Canadian).
Acumen Capital downgraded Zargon Oil & Gas to "hold" from "speculative buy" with a price target of $4.75 (Canadian).
RBC Dominion Securities initiated coverage on Chemtrade Logistics Income Fund with a "sector perform" rating and price target of $21 (Canadian).
With files from Bloomberg
Darcy Keith